RBS to claw back staff bonuses to pay Libor fines

Picture: Getty

MARTIN FLANAGAN

ROYAL Bank of Scotland is set to claw back up to £100 million in previously paid staff bonuses to offset huge fines it is expected to receive for interest rate rigging.

The taxpayer-controlled bank is understood to be considering reclaiming the payouts to cover imminent fines from UK and US regulators for its part in the manipulation by traders of the Libor inter-bank landing rate.

The scandal has led to a purge of top staff at Barclays, where new chief executive Antony Jenkins has said he will waive a maximum potential 2012 bonus of £2.75m, after a “very difficult” year.

Barclays has been fined a total of £290m by the Financial Services Authority (FSA), the US department of justice and the US Commodity Futures Trading Commission, for Libor manipulation.

Now RBS is looking at levying a “tax” of up to £100m on bonuses for staff in its markets unit, which was closely involved in the Libor rate-fixing.

That would be on top of about £150m the bank is set to dock from the unpaid bonus pool of 2012 to set against the Libor fines, expected to be between £400m and £500m. The bank is expected to agree a settlement next week with the FSA and US regulators.

Politicians and shareholders said the clawback would be a welcome move by RBS, which is 82 per cent taxpayer-owned.

SNP Treasury spokesman Stewart Hosie, who sits on the Commons Treasury select committee, said: “In terms of Libor fines, we made clear that banks had to pay them and not the taxpayer. The banks must do whatever they can to lessen the impact on the taxpayer.

“If RBS is clawing back bonus payments that haven’t gone out the door yet, that is welcome.

“If they are doing the same for bonuses that have been paid already, that is also a welcome decision by the banks because the taxpayer must not be in the firing line to pay any of the fines.”

RBS’s remuneration committee, chaired by non-executive director Penny Hughes, is understood to be considering the option of a “flat tax” on the pay of hundreds of employees in the markets business who generally earn much more than high street staff.

It is thought it might involve 15 per cent of bonus payouts over the past few years being clawed back, although no final decision has been taken.

Eric Chalker, director of the UK Shareholders Association, which represents around 2,000 private investors, said he would applaud such a move.

He said: “It would seem highly equitable. A lot of money has been paid to bankers, sometimes through artificially inflated profits or through banks being engaged in practices that exploited the public.

“The only ones to have suffered so far have been the shareholders, so they will think this is just, even if they will still have to struggle with their own losses for a long time to come.

“The particular circumstances may be different between RBS and Barclays, but the same principles of fairness apply. I think the wider public would also approve.”

Yesterday, Mr Jenkins, a veteran of Barclays retail arm that has also been tainted by mis-selling, said: “I concluded early this week that I do not wish to be considered for a bonus award for 2012 and I have communicated that decision to the board.

“The year just past was clearly a very difficult one for Barclays and its stakeholders, with multiple issues of our own making besetting the bank.

“I think it only right that I bear an appropriate degree of accountability for those matters and I have concluded that it would be wrong for me to receive a bonus for 2012 given those circumstances.”

Barclays is in the process of finalising its 2012 bonuses. Overall pay for its investment bankers is expected to be cut by up to 20 per cent.

RBS, meanwhile, is expected to pay between £250m and £300m to staff in its markets and international banking businesses. Chief executive Stephen Hester has already voluntarily waived his entitlement to any bonus for 2012, which he announced amid the bank’s computer meltdown last summer.

An RBS spokesman declined to comment yesterday on its remuneration policies.

But any bonus clawback is likely to be welcomed by the UK government, after a string of scandals including Libor, payment protection insurance mis-selling and touting inappropriate, complex interest-rate swaps to small businesses.

A Downing Street spokeswoman said: “We still have a very clear line that any such bonuses should follow a policy of restraint and should reflect good performance. That applies to bonuses across the board.”

Ian Gordon, banking analyst at stockbroker Investec, said: “I would be mildly surprised if RBS was considering this type of clawback, but only because we have not seen it [in connection with Libor] before. But it’s certainly a legitimate thing for them to explore given the material amounts and legacy issues involved.”